Apple Could Test Big Pivot After Underwhelming Launch Event
Wall Street largely seemed bored by Apple's latest announcements and investors are wondering if now is a good time to get back in.
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The greatest consumer electronics company of all-time has been all over the news already this week, so let's explore and try to come to an informed, logical decision.
On Monday, the firm held its "big" launch event, supposedly for the next series of iPhones that would be integrated with artificial or "Apple Intelligence" as well as some other products that at least sound interesting. So, it was that Apple revealed the iPhone 16 lineup, which is designed for AI and "marks the beginning of an exciting new era," according to CEO Tim Cook.
The iPhone 16 Plus will have a 6.7-inch screen and come in new colors. The iPhone 16 has a new camera control mechanism that gives users more access to the camera and improved control over its features. This will include, by the way, visual intelligence, which is not yet ready for prime time. Yawn.
The new "lower-end" phones contain a 3 nm A18 chip, which will be twice as fast for machine learning and has 17% more bandwidth than what is currently available. The 6-core A18 will also be up to 30% faster than the CPU in iPhone 15 and 50% faster than the CPU in iPhone 14, while using 30% less power than the previous chip. A 5-core A18 will be made available that is even faster. The iPhone 16 and 16 Plus will start at $799 and $899 and both be ready for purchase on the launch date of September 20, 2024.
The upscale iPhone 16 Pro and iPhone 16 Pro Max will offer new AI-powered capabilities and come with 6.3-inch and 6.9-inch screens. These phones will have three new cameras to include a 5x telephoto camera capable of recording 4K video at 120 frames per second for slow motion images. The Pro and Pro Max will make use of titanium to strengthen the phone and will include a 16-core version of the A18. The Pro and Pro Max will start at $99 and $1,199 respectively and be available for purchase on September 20th.
Apple Intelligence
The tech giant tried to show off its "Apple Intelligence," which will be available starting in October, by touting that users can create new emoji symbols by typing a description of what they want. I think I may throw up. Users will also be able to pull photos or movies automatically to create a storyline. Gee willikers, can't wait.
Reaction
Wall Street largely seemed bored, or less than excited, in their reaction to the new phones. That said, I did not see a lot of changes in ratings or target prices.
From Citigroup: "in line with expectations". From Bernstein: "somewhat underwhelming." From Morgan Stanley: "No major surprises." From Needham: "We did not see any compelling use case shown by Apple yesterday that would get consumers to buy an iPhone 16."
Ouch.
To Make Matters Worse
Huawei unveiled a trifold phone that will have three screens and, as the name implies, fold. This phone, despite starting at the equivalent of more than $2,800, will seriously compete for AI-integrated smartphone market share in China.
More than 3.5 million individuals had already pre-ordered Huawei's trifold Mate XT by mid-day Tuesday in China. That number is said to have already exceeded 4 million.
Rubbing Salt in the Wound
The European Union's top court ruled against Apple in what has been a ten-year battle over taxes owed in Ireland. The case involves what are being referred to as "illegal" tax benefits over two decades. Through twists and turns and appeals on both sides that made pit stops in 2016, 2019 and 2020, it looks like this is it and Apple will have to pay the Republic of Ireland 13 billion euros, or about $14.4 billion in back taxes.
Anytime a firm gets tagged for $14billion, it's going to hurt, but Apple is in a far better position than most to be able to absorb such a hit. As of the end of the June quarter, Apple has $153.041 billion in cash and investments on that balance sheet. Of course, the firm also had $91.304 billion in debt. That leaves a net cash position of $61.737 million.
The truth is that the firm can probably pay this tax bill out of newly-created free cash flow for the current quarter if they just halve the pace of their share repurchase program for the time being.
There Were Positives
Most analysts that I read seemed more impressed with the newer releases of the Apple Watch and the firm's AirPods that both brought with them health-related improvements. The newer Apple Watches will bring the ability to detect signs of sleep apnea, while the newer AirPods will bring basic hearing-aid capabilities. That could be very popular in the veteran community, as I would venture the majority of us, who served either in aviation or combat arms, have lost some or most of our ability to hear. Personally, I did not like traditional hearing aids. Maybe giving something like this a shot would be worth it.
The Chart
Readers will quickly see that, right now, Apple does not have the most constructive chart in our universe. Readers will see a sub-neutral reading for relative strength above the chart and a daily MACD below the chart that reflects a modestly bearish set-up. The line for the 12-day EMA has crossed below the line for the 26-day EMA, while the histogram for the nine-day EMA stands below the zero-bound. That's not bullish.
We can also see that the retracement of the April into July rally that ran into early August found support in between a true 61.8% Fibonacci retracement and the 50% line (halfway back point). Additionally, today (Tuesday) looks to be the second straight day that AAPL fails to make contact with its own 50-day SMA. It does this as the 21-day EMA converges on that line from above. I could see the swing crowd pulling the plug on long positions as this happens.
Where does AAPL go from here? I could be wrong. I hope I am for the sake of our marketplace. I think the stock may test the $196 pivot created by the double-top reversal pattern outlined above for you in purple. If that spot fails, then $178 resistance from last spring is not out of the question as eventual support.
It really all depends on reconnecting with the 50-day SMA. The pivot and the 200-day line are currently one and the same, and there could be some significant gravitational pull there.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
